1. The Programme, Financial and Administrative Committee of the Governing Body met on 21 and 25 March 1997 under the chairmanship of Mr. Arrate MacNiven, Chairman of the Governing Body. Mr. C. Gray (Workers' spokesman) was the Reporter.

Programme and Budget proposals for 1998-99(Sixth item on the agenda)

2. When the Committee resumed its discussion of the Programme and Budget proposals for 1998-99, the Director-General made a statement on the adjustments to the original proposals which he had found it possible to suggest. This statement is reproduced in Appendix III.

Further discussion

3. The Committee had before it a document(1) containing the Director-General's suggested adjustments to the Programme and Budget proposals for 1998-99, which were considered together with the Director-General's oral statement to the Committee. Tables showing details of the adjustments to the initial proposals are shown in document GB.268/PFA/6/3, which is reproduced as Appendix IV to this report.

4. Mr. Oechslin said that the Employers had examined the Director-General's proposals and had found proposal C, concerning the reorganization of General Management, unacceptable both in form and substance. It was not logical to compare an organization as complex as the ILO to enterprises because the ILO was a political as well as a technical organization. Other international organizations were turning increasingly to regional structures but account had to be taken within the ILO of tripartism and the need to find room in the management team for all sensitivities. The current structure, which might not be the best possible, took account of this need and at the same time gave the ILO highly qualified staff who were capable of carrying out a full range of technical functions.

5. Members of General Management were not officials like the rest of the staff; the proof was that these appointments were subject to consultation with the Officers of the Governing Body. Without wishing to erode the responsibility of the Director-General, the Employers believed that the structure of General Management could not lie outside the responsibility of the Governing Body. This did not mean that the present structure could not be improved and simplified or that it was sacred; only that it should be the result of prior consultation and discussions, and take account of the legitimate sensitivities of all concerned. In particular, it should not be based on such matters of chance as the date of a person's retirement. If this proposal were maintained, the Employers would certainly be unable to vote in favour of the budget either at this Committee, the Governing Body or the Conference.

6. The Employers had reservations also on some of the other proposals, and if more consideration had been given to some of their suggestions other economies might have been possible. Examples included some activities in major programme 125, which could have been dealt with more effectively elsewhere. The Employers had also asked for more resources for major programme 225 but there had been no reply on this point. In the present circumstances increases were not easy to make, but a reply from the Director-General outlining solutions for the future that were not necessarily of a strictly budgetary nature would have been appreciated.

7. Mr. Gray, on behalf of the Worker members, referred to part A of the Office paper which proposed reductions in the level of the budget equal to the provision for cost increases relating to non-staff costs. From the Office paper it was not clear how these reductions were to be applied, but one possibility was for a country's activities to be adjusted in accordance with its rate of inflation. The Workers could not agree to an automatic adjustment of this kind and urged the Office to look for a more equitable way to spread the burden of the reductions proposed under this head. The Workers agreed in principle to the idea of reducing travel costs but this should not become an obsession to the point where physical travel was replaced by faxes and e-mail. The ILO's work in the field could not be properly effective without visits to offices and programmes in the field. It should be possible to make savings through negotiation with the agents who handle ILO travel and this would be a better approach than making an across-the-board reduction.

8. Turning to Appendix 2 of the Office paper, the Workers were pleased that the work item on structural adjustment, employment and the social partners had been changed into an action programme. The Workers were concerned that there was nothing in the current proposals that reflected the proposal by the Director-General at the November 1996 Session of the Governing Body to integrate multinational enterprises into the programme on enterprise and cooperative development. This was the proper place for it and the move would probably bring savings in staff costs as well. The Workers agreed to the deletion of the work item on the labour and social implications of genetic screening, to the addition of two days to the Meeting of Experts on Labour Inspection and Child Labour, and to the addition of resources for the Meeting of Experts on Ambient Factors in the Workplace. They would prefer the reinstatement of the action programme on the contribution of industrial relations to regional economic integration.

9. The representative of the Government of the Islamic Republic of Iran, on behalf of the Asia and Pacific group, expressed general support for the adjustments in the light of the earlier discussion in the Committee. They too were concerned at the possibility that a country's activities could be adjusted to reflect its rate of inflation, and strongly believed that in view of regional needs the resources for the region should be increased. If there were to be any reductions they should not affect the content or the quality of technical cooperation activities and programmes, which should be supported by adequate resources for travel.

10. The main concern of the Asia and Pacific group, however, was the proposal in part C of the Office paper concerning the reorganization of General Management. The information on this proposal was very general and it would be useful to have more detail on exactly what was proposed which, in any case, should be in line with previous discussions in the Governing Body on this matter.

11. The representative of the Government of France expressed support for the revised proposals, and noted with approval that the adjustments still left priority programmes intact. However, the proposal to reorganize General Management gave rise to serious concern, especially as it followed so closely on a proposal the previous year to create a new post in the Directorate. This was not the time to be looking at a reorganization of management and these economies should be sought elsewhere.

12. The representative of the Government of Germany thought the proposals were a well-balanced reaction to the earlier discussion in the Committee. Although management should not be exempt in the search for savings, the proposed reorganization was a sensitive matter and he supported the proposal by the representative of the Government of France.

13. Mr. Brett said that discussion on budget adjustments was always difficult because it was almost impossible for a proposal not to receive an objection from some quarter, and if these proposals were rejected, then savings would have to be found elsewhere. He asked if the Office could supply details on the cost of the Second Enterprise Forum and supported Mr. Gray's comment that transferring multinational enterprises to the programme on enterprise and cooperative development would save money and be more logical. He urged the Office to look again at this proposal.

14. The representative of the Government of Mexico, speaking on behalf of a number of Governments of the Americas, agreed that reductions should not affect technical cooperation programmes and that there was not sufficient information to decide on the proposal for the reorganization of General Management. He opposed the reduction to major programme 260 (Field programmes in the Americas) because already it had the smallest increase among regional field programmes compared with the present biennium.

15. The representative of the Government of Japan expressed full agreement with the statement by the spokesman for the Asia and Pacific region and with the principle that reductions should not affect technical cooperation activities. He also agreed that it was too early to take a decision on the proposal for the reorganization of General Management.

16. The representative of the Government of Canada expressed appreciation to the Director-General for his efforts to absorb the increases for inflation. She supported the proposals generally, including that to reorganize General Management, but considered it should be studied in more detail before taking specific decisions.

17. The representative of the Government of Panama agreed that more information was required before taking a decision on the proposal to reorganize General Management. He supported the suggestion put forward by the representative of the Government of Mexico that reductions should not affect technical cooperation activities in the Americas because it had been favoured much less than other regions in the increases proposed for the next biennium.

18. The representative of the Government of Sweden said that in the light of the proposed adjustments, he was even more disappointed now with the budget for the next biennium than he was two weeks ago. Even the original proposals did not constitute a document that could serve as a basis for decisions by the Governing Body. The main area of concern was not so much the level of the budget as its content, and with properly justified proposals he would even have considered an expansion of ILO activities. The cuts being proposed did not concern matters of efficiency and transparency and it was disappointing to see that discussion appeared to be focusing on the level of travel costs and senior posts in the Office.

19. On both these proposals it was difficult to know whether members of the Governing Body could, or even should, express an opinion because both were first and foremost managerial decisions for the Director-General to decide. The Governing Body might sometimes argue against his proposals but it would be quite wrong to tie his hands on managerial and personnel matters. He expressed the hope that in future the Governing Body would be given programme and budget proposals to consider that showed a clearer connection between the goals of the ILO and the programmes to reach them. The aim should not be to satisfy members of the Governing Body but to help the millions around the world suffering from poor working conditions, unemployment, poverty and misery.

20. The representative of the Government of the United States agreed with previous speakers who had expressed appreciation for the adjustments put forward by the Director-General. Some of the proposals appeared to be too controversial to win full support in the Committee so it might be useful to have other proposals to consider to achieve the reductions sought. Major programme 10 (International Labour Conference) were based on six Conference agenda items and reducing them to four could save up to $1 million without jeopardizing priorities. Major programme 125 (Development policies) included activities concerned with education on family welfare and reproductive health, which hardly fell within the ILO's mandate. It would be useful to know the cost of these activities to see how much could be saved if they, like the genetic screening programme, were deleted. She expressed support for the suggestion to include a maritime commission in major programme 100 (Sectoral activities) but it would be useful to see if other meetings under this programme could be postponed or perhaps even eliminated. Developing countries were clearly concerned that reductions should not affect technical cooperation activities but this would be easier to do if there was a clearer presentation showing the full resources devoted to these programmes. If the Office could examine these proposals in detail it should be possible to reduce the budget even further.

21. The representative of the Government of Finland expressed support for the proposals of the Director-General as they stood. They were a well-balanced and responsible reaction to the earlier comments of the Committee but he would keep an open mind on any further adjustments agreed by consensus.

22. The representative of the Government of Nigeria, on behalf of the African member States, expressed regret that the Committee found itself having to discuss reductions to the budget for the next biennium. One of the main difficulties for the ILO was that some member States paid only a part of the contributions, while others were unable to pay anything. Whatever efforts were made to solve this problem, whether by campaigning for increased financial contributions from the larger member States, or by evaluating again the procedures for assessing member States, the African members urged that there should be no cuts in either technical cooperation or field programmes. They also believed it was too early to decide on the proposal concerning the reorganization of management, and suggested that perhaps it could be taken up at the next session of the Governing Body.

23. The representative of the Government of Brazil expressed full support for the remarks made by the representative of the Government of Mexico.

24. The representative of the Government of Italy appreciated the Director-General's amended proposals and suggested that the Office might be able to identify short-term savings by postponing meetings and longer-term savings by the reorganization and possible merger of some departments and programmes. He also supported previous speakers who suggested that a decision on the reorganization of management should not be taken before more detailed discussion.

25. The representative of the Government of South Africa agreed with the comments of the representative of the Government of Nigeria. Since the end of the cold war there had been a sharp increase in the demand for ILO services and this, coupled with the non-payment of contributions by member States, made the Director-General's task extremely difficult. He agreed with the representative of the Government of Sweden that the Governing Body should not be concentrating on budget cuts. Members should ask themselves what sort of ILO they wanted for the twenty-first century, and aim more at the promotion of social justice as outlined in the Declaration of Philadelphia and the Constitution. This could hardly be achieved if the Committee was looking at budget cuts for programmes involving children in work, working conditions for women, alleviation of poverty and many other technical projects.

26. The Director-General, replying to the representative of the Government of Sweden and other representatives who had spoken on the revised proposals, regretted having to make further cuts and feared that the process would not stop there.

27. In reply to the representative of the Government of Nigeria, spokesman for the African group, he said that the Committee had to take its responsibilities and not prolong the debate right up to November. The Governing Body would also have to assume its responsibilities so that the Conference could adopt a budget that would enable the Organization to function in 1998-99. Consequently, the Committee had no option but to take a decision.

28. The Director-General referred to the documents calling for programme cuts. Since a reduction of around $11 million had been asked for, that was what he was proposing to the Governing Body. The Committee appeared to have accepted all the measures he had proposed except one. With regard to inflation there was no question of penalizing a country just because its rate of inflation was higher than another. The Committee had to take into account all the different situations and adopt a general measure with due regard for the specific circumstances of certain countries or certain regions.

29. The same consideration applied to travel costs where a 10 per cent reduction had been proposed. During the general discussion the Treasurer had already mentioned that the Office was planning to take advantage of changes in the international travel market so as to limit the impact of this reduction as much as possible. There would have to be a certain degree of flexibility so that regions where links were indispensable were not penalized by the fact that less costly arrangements might be found for other regions.

30. The Director-General acknowledged Mr. Gray's comment that the problem of MULTI had to be looked at in a more general perspective. In the light of the previous day's discussion and those that would take place the following Monday on the problem of globalization and the role of the ILO, every care should be taken to see these issues in the broadest possible context. A decision could not be postponed much longer, and he intended to submit proposals as early as possible, bearing in mind Monday's discussion on the subject and the Governing Body's comments on the LILS Committee's conclusions.

31. Reverting to the question of the $11 million, the Director-General observed that the only point on which there was still disagreement was the reform of General Management. Clearly, if the saving of $2.3 million was not made under this heading, it would have to be made elsewhere. That could not be done simply by refining the measures that had already been taken, and he did not see how it was possible to avoid a number of programmes at headquarters or in the field being affected. He suggested that the Committee should think again before rejecting his proposal.

32. In his view the only real question was whether or not the Governing Body thought that the Office could function with six General Management posts at headquarters. If not, $2.3 million had to be found in savings elsewhere. He did not intend to identify specific posts for suppression; that would have to be part of the general package once the reduction had been approved. There was currently an incumbent in each of these posts, and the Director-General could not suggest that one or other might be eliminated without giving the impression that he was attacking the person, country or group concerned. He suggested that the Committee should decide on the principle, which would only be applied at the start of the next biennium.

33. Turning to Mr. Oechslin's observations, he said that the ILO was not the kind of organization that could not function with six General Management posts at headquarters, plus five regional posts. No organization, however complex, needed more people than that to function.

34. In reply to the questions posed by the representatives of the Governments of the Islamic Republic of Iran, Japan and Mexico, among others, the Director-General said that it was his responsibility to propose an appropriate structure to the Governing Body and corresponding appointments that took into account the diversity of the groups. The ILO was a complex organization and due account should be taken of its diversity.

35. The questions to be answered were whether the Organization could operate with only six posts; whether the Committee agreed with the Director-General that the Governing Body should in due course discuss the structure of the General Management; and whether it agreed to discuss the corresponding appointments. If there was agreement on these three points, the saving of $2.3 million would be possible.

36. Reverting to Mr. Oechslin's statement, the Director-General said that he had never suggested that it was the end of the person's contract that should determine whether or not the post was maintained. It was not because a post fell vacant that it should be suppressed. However the fact that several posts would become vacant over the next two years would make it possible for the Governing Body to make a choice. He repeated that he had no intention to prejudge the choice of posts without discussing the matter with the Governing Body, which had to confront two issues. Did it feel that six posts were sufficient for the next biennium and for future biennia? Secondly was there agreement that the Director-General should take no decision on the matter and leave it to the Governing Body to decide in due course? If the reply to both questions was yes, he would not have to come back to the Governing Body with some painful and difficult choices. If the answer was no, and the nine posts were to remain, then he would have to propose a further $2.3 million in cuts to the Governing Body.

37. The Director-General repeated that he did not intend that any particular post should be suppressed right away or when the corresponding contracts came to an end. But he was asking the Governing Body, because he was convinced that it was possible, to allow the International Labour Organization to function with six General Management posts at headquarters.

38. Mr. Oechslin, speaking on behalf of the Employers' group, stated that, following discussion by his group, there was still opposition to point C of the paper under discussion. The procedure outlined by the Director-General involved the cutting of three ADG and DDG positions and distributing the duties associated with those posts among the remaining six posts. That procedure was considered unusual in that it seemed to put the cart before the horse and it was not clear as to how many senior directorate posts were really necessary. It would be useful to carry out a study and discuss the structure of the directorate at some time and to determine the optimum number of advisers available to the Director-General. It was also not clear as to how and whether the proposed ADG and DDG positions would eventually be reinstated. Although no specific posts had been identified, certain positions were considered very important by the Employers, especially that relating to the Institute for Labour Studies.

39. The Employers did not agree with the comments made by the representative of the Government of Sweden. The Employers had always given priority to programmes and not to budget levels, and their opposition to point C was based on the Organization's fundamental values, especially that of tripartism which presupposed equal and fair treatment for all three groups. It would be a very serious matter if the Organization adopted a decision when one of the three groups had voiced its formal opposition to it. It was imperative that cohesion was maintained within the Organization, particularly at a time when it was going through a turning point in its history.

40. With regard to multinationals, which were referred to by the Workers earlier, the text of the declaration was indeed an important one which had been adopted by consensus and which required acceptance by the international enterprises. That acceptance was based on the confidence given to the Organization's monitoring mechanism as well as to its impartial interpretation of the declaration. The workings of the ENTERPRISE department were a completely different issue since that department dealt primarily with enterprise development and employment creation.

41. Mr. Brett, for the Workers, was surprised by the support given to the declaration by the Employers considering the lack of support shown in the past. With regard to General Management, members had traditionally reflected geographical as well as Worker/Employer group interests, and such an arrangement should not be changed, especially since certain regions were already underrepresented. He also requested further information regarding the identification of the posts involved as well as the timing of associated savings. The removal of DDG or ADG posts should not result in the reversing of policy decisions such as those taken previously concerning the Institute.

42. Replying to Mr. Oechslin, the Director-General wondered whether the proposal he had just made really involved putting the cart before the horse. He found that, very often in the PFAC, supposed ulterior motives were often given more importance than what was actually said or done.

43. He was trying to propose cuts that would be as effective and painless as possible.

44. Everybody appeared to consider the proposed suppression of three General Management posts rational. Nobody contested that. The only problem was the supposed ulterior motives and the possible repercussions of these proposals.

45. There were two ways of looking at Mr. Oechslin's statement. The first was to assume that, for the Employers' group, being represented on the management team meant that the number of posts stayed as it was, at nine. If that was so, the Director-General would have to withdraw his proposal and make others.

46. The second interpretation was that Mr. Oechslin was not against the idea of there being six posts on principle, but was worried that the post currently held by a representative of the Employers' group might not be renewed until a new structure of the General Management had been proposed.

47. The Director-General made one last proposal which would mean cutting the planned saving of $2.3 million by half. If the Governing Body were to agree now to the Office functioning with six General Management posts in Geneva as from 1998-99, the Director-General could then submit proposals to the Governing Body in March 1999 on how he intended to structure the General Management.

48. The posts concerned would then be filled to the end of March 1999. In the first place, this would mean a saving of three posts for one year of the biennium; secondly, the Director-General would propose an organizational structure with six posts; thirdly, he would in consultation with the Officers of the Governing Body fill the posts that became vacant. However, that also meant that there would be no savings until March 1999; in other words, the post that the Employers' group was concerned about would be filled until March 1999. There would then be every hope of having a more rational structure than at present, and the post concerned would be filled -- which would at the same time dispel any suspicion to the contrary.

49. Before the Committee rose, the Director-General explained further his proposal that they make only half the saving initially planned under General Management, i.e. $1,250,000. The other half of the $2.3 million could be saved in the following way: under major programme 220 the Office had identified $250,000 that could be economized in typing services by suppressing one General Service post and certain other non-staff costs; under major programme 145 the amount earmarked for enhancing the usefulness of ILO databases could be cut by $70,000; under major programme 290 $387,000 could be economized by doing away with the provision for a contribution to the Building and Accommodation Fund, since the Office was currently trying very hard to rent out one entire floor of the building; and $100,000 could be saved by cutting certain overlapping activities in major programmes 60 and 125. To this total of $807,000 could be added $412,000 deriving from a cancellation of the two forums that had been scheduled in the programme and budget proposals, or $345,000 deriving from the cancellation of two symposiums scheduled under major programmes 225 and 230 (International Symposium on the Future of Employers' Organizations, and International Symposium on Trade Unions and the Informal Sector), or $430,000 by postponing one of the sectoral meetings.

50. Depending on which of the last three suggestions was adopted, the total saving would be $1,219,000, $1,152,000 or $1,242,000.

51. The Committee then proceeded to a discussion of a paper submitted for its consideration by the Government of the United Kingdom, and a second paper submitted by the IMEC Governments.

Resolution for submission to the International Labour Conferenceas presented by the Government of the United Kingdom

52. The Committee had before it an amended text (reproduced in Appendix V) for the resolution to be submitted to the 85th Session of the International Labour Conference (June 1997) concerning the budget of expenditure and income for the 66th financial period ending 31 December 1999.

53. Mr. Brett, speaking on behalf of the Worker members, gave their wholehearted support to the proposal.

55. The text of the resolution was approved, subject to further discussion concerning the level of the Programme and Budget for 1998-99.

Proposal by the IMEC Governments

56. The Committee had before it a proposal by the IMEC Governments (reproduced as Appendix VI) concerning the presentation of programme and budget proposals.

57. The representative of the Government of Mexico, speaking for the Americas group, gave their full support to the proposal.

58. The Director-General said that he had no objection to section B of the appendix to the IMEC group's proposal, but was surprised at section A. He did not understand very well what type of document the Office would have to prepare for the Conference compared to what had already been submitted in the budget proposals and discussed by the Committee. Mr. Kirzbaum, responding to a number of questions that had been raised during the debate on the budget, said that he found it very difficult to see what more information the Conference could be given in June than what had already been submitted to the Governing Body.

59. Mr. Brett, on behalf of the Worker members, gave their support to Part (B) of the proposal. However, they did not see the need for a further document as called for in Part (A) unless the IMEC Governments were seeking to reopen the budget debate completely at the International Labour Conference, a possibility that would be better avoided.

60. Mr. Marshall, on behalf of the Employer members, supported the proposal, although he took note of the comments made by the Director-General and the Worker members. It would be useful if the IMEC Governments could explain why they believed a paper prepared for the Conference would be appropriate.

61. The representative of the Government of Canada, speaking on behalf of the IMEC Governments, welcomed the endorsement given to Part (B) of the proposal. While the Office had given much of the information that had been requested during the discussion, particularly in document GB.268/PFA/6/S2, the IMEC Governments believed that some additional information would be helpful and that the Conference would benefit from the summaries that had been given being presented in an integral form. There was no intention that the budget discussion would be reopened, either in regard to the allocations or to the level of the budget.

62. The Director-General repeated that he did not see what more the Office could offer in June than it already had. The reports of the PFAC and of the Governing Body were available, and all the Conference delegates would therefore have full access to all the necessary information.

63. To make things absolutely clear, he repeated that the Office really did not see what kind of document was expected. He did not want there to be any misunderstanding, and the Office to be asked to do something that it was unable to do.

64. The representative of the Government of France agreed that some of the information requested in the proposal had already been provided by the Office. He emphasized that the proposal only asked for information to the extent that it was possible.

65. Mr. Marshall thought it would be useful for all constituents to have a document which outlined the main objectives and sub-objectives of the Organization, and the contribution of the major programmes, the action programmes and the research activities to those objectives, so that everybody could understand the strategic approach being developed by the Office. The Employer members endorsed the proposal by the IMEC Governments.

66. Replying to Mr. Marshall, the Director-General said that the answers had already been given and would be included in the report of the PFAC. It was not that he was not willing; it was just that he wanted to know what more was being asked for. If it was a question of the document being resubmitted, what was the point of reissuing a document that already existed.

67. Mr. Brett confirmed the Worker members' position. He suggested that the IMEC Governments should specify what information they wanted. If the IMEC Governments could not be more precise, there was no point in approving the proposal.

68. The representative of the Government of Nigeria, on behalf of the African group, said that his group had not had time to study the proposal and therefore could not express an opinion on it.

69. The representative of the Government of the United States reminded the Committee that there was a constitutional requirement that the Conference must vote on and approve the budget and that the Governing Body had a fiduciary responsibility to the Conference. During the course of the Committee's discussions there had been much debate on the presentation of the budget and how the current presentation did not show how the programme was developed, how money was spent or how programme evaluations were incorporated into future programmes. From the responses given by the Office it was apparent that this information existed and could be presented in a digestible form. The IMEC Governments wanted to ensure that the Committee's responsibility to the Conference was discharged; they wanted to be sure that the Conference fully understood what it was voting on. In the future the Committee might want to consider whether it was necessary for the Conference to examine the budget if it had already been agreed that there would be no changes to the programme or to the level of the budget. There had been discussion along these lines in the Finance Committee in 1995. In the meantime, the information requested in the proposal should be provided. Some of it had already been supplied, but information on the major evaluations planned for the biennium as requested in paragraph (d) had not. It would be useful to have all of this information in one place.

70. Mr. Brett said that the statement made by the representative of the Government of the United States confirmed the Worker members' fears that providing this information might be used as an excuse for reopening discussion on the budget. This would not be helpful.

71. The representative of the Government of Nigeria said that both sections A and B of the paper deserved serious consideration and that the African group could not express an opinion until both sections had been fully discussed.

72. The Chairman suspended discussion on the proposal. He invited the Committee to give their views on the second set of proposals of the Director-General concerning amendments to the programme and budget.

73. Mr. Oechslin, speaking on behalf of the Employer members, thanked the Director-General for the effort he had made to reach a compromise solution but did not feel that the solution offered solved the problem. The Employers, therefore, maintained their position.

74. Mr. Brett, speaking on behalf of the Worker members, appreciated the endeavour to find a compromise but also thought it had failed. He requested that a new set of proposals be prepared for consideration by the PFAC.

75. The representative of the Government of the Islamic Republic of Iran, speaking for the Asian and Pacific members of the Governing Body, reiterated their position regarding the reduction in the posts of General Management. They thought that without any information on the programmes and the posts which would be affected, it would not be appropriate to make a decision. They hoped that the savings would be sought from other parts of the budget.

76. The Director-General concluded from the last remarks that he was being asked to make new proposals for savings of around $1,150,000. These would have to take the form of across-the-board cuts. He therefore proposed that programmes 50 to 145 be cut by $575,817, shared more or less equally among them, and that the resources for field programmes under major programmes 250 to 280 be cut by 0.4 per cent, or $74,183. This gave a total of $1,150,000 which, added to the proposals already made, gave the desired figure of $2.3 million.

77. Mr. Brett, speaking on behalf of the Worker members, asked that these proposals be made available in a paper for consideration by the PFAC. It would be preferable to have across-the-board cuts, as proposed by the Director-General, rather than cut areas which were sensitive to each group.

78. The representative of the Government of Nigeria supported the views expressed by the Worker members. He also agreed with the Employer members that the adjustments proposed should not be made in respect of General Management. The time available was too short to determine exactly what modifications were being proposed. He also requested that the proposals be made available in a paper so that they could be studied closely, and that priorities in the subregion could be identified. With regard to the IMEC proposal, he agreed with Appendix B, but for the moment reserved his position with regard to Appendix A.

79. Mr. Brett, speaking on behalf of the Worker members, felt that the responsibility for the programme and budget selected should be borne by all members. It was the governments who were anxious to reduce the budget yet, at the same time, they voiced concern about some of the reductions the Director-General had put forward. Perhaps Government members could accept a budget that would be $2.3 million more than the one presented. It was a very small amount in terms of the budget and it would, it seemed, ease a number of problems for both the Worker and Employer members and indeed some members of the Government group who shared a desire not to cut a number of areas such as senior management.

80. The representative of the Government of Germany noted that there was some basic agreement on the Director-General's proposals for cuts with the exception of this particular item of $2.3 million in the area of staff costs. He proposed three possibilities to discuss the remaining $2.3 million. The first was to accept the Director-General's proposal, which seemed to be impossible as both the non-government groups were against it. The second was to accept the proposal made a little earlier by the Director-General to find the amount of $2.3 million through cuts in individual programmes. The third, as suggested by the Worker members, would be to cut the budget by $11 million less the $2.3 million in dispute.

81. The Chairman proposed that consultations between the Office and the various groups be held prior to the next meeting of the Committee which might help in the search for consensus. With respect to Appendix A of the proposal put forward by the IMEC group, it would be helpful if the group could give further details to the Office of the information they regarded as important and which was not currently available to the Conference. The resolution spoke of a supplementary document based on these considerations for the 1998-99 programme and budget.

82. At this point the Committee adjourned to give the Director-General time to prepare further adjustments to the programme and budget proposals.

Resumption of discussion

Proposal by the IMEC Governments

83. The Committee resumed its discussion on 25 March 1997 when it had before it a revised text (reproduced as Appendix VIII to this report) for part of the original proposal from the IMEC Governments for an additional document for submission to the Conference.

84. The representative of the Government of Canada, speaking on behalf of the IMEC group, recalled that several Committee members had asked for clarification on certain aspects of the original proposal put forward by the IMEC Governments. A revised text was included in the paper now before the Committee and in essence indicated that the document would not be a vehicle to reopen discussion on the programme and budget proposals, nor would it include any supplementary information. It would be based on information provided in the documents considered by the Committee and, where appropriate, on supplementary information provided orally by ILO officials during the debate. The intention of the covering document was to draw together and collate information about the major programmes to provide Conference delegates and the public in general with an overview of the strategic thinking, the activities and the resources that underpinned the major priorities of the ILO.

85. Mr. Marshall said that the Employers acknowledged that the new document clarified the intention behind the IMEC proposal, which was that the document would be an information tool for Conference participants and also for a wider public. The Employers were happy to support the proposal.

86. Mr. Gray said that the Workers also accepted the proposal.

87. The representative of the Government of Mexico, on behalf of the Americas group, endorsed the proposal put forward by the IMEC group.

88.The Committee recommends that the Governing Body, without prejudice to the Programme and Budget proposals for 1998-99 as approved by the Governing Body for submission to the Conference, request the Director-General --

(a) to provide a covering document for the programme and budget for 1998-99 to the International Labour Conference that would pull together information from the Programme and Budget proposals for 1998-99, the introductory presentation by the Director-General to the Governing Body, the information presented in GB.268/PFA/6/S2, and the replies by senior management during the PFAC deliberations, in order to provide ILC participants with a cohesive overview of the strategic priorities with the supporting activities and resources;

(b) to provide, for future programmes and budgets, commencing with the Programme and Budget for 2000-2001, an integrated draft programme and budget, in two sections as follows:

(i) an introductory "strategic programme and budget overview" that outlines the strategic thinking and internal working methods on which the programme and budget is based; and presents information in tabular or chart form where appropriate, in accordance with primary objectives and sub-objectives as follows:

(1) provides a clear statement of overall objectives and sub-objectives in terms of desired outcomes for the period;

(2) for each of these, on the programme and subprogramme level, states specific objectives and priority activities in such a way as to permit monitoring and evaluation of results measured against stated priorities;

(3) for regional and active partnership programmes, provides a breakdown of spending under the substantive major programmes and indicates how the activities in these programmes, including at the country level, relate to the three priority objectives; and resources allocated to developing countries, in particular the poorest;

(4) where possible, indicates how evaluation results have been taken into account;

(5) shows financial and staff resource allocations for the objectives and sub-objectives;

(6) indicates shifts and trends between priorities;

(7) differentiates between activities required for legal and regulatory obligations, and those chosen on the basis of policy and programme considerations;

(8) indicates discontinued and new activities;

(ii) an administrative/accounting budget in the present analytical form.

89. The Committee had before it paper GB.268/PFA/6/4, reproduced as Appendix VII to this report, containing further adjustments to the Director-General's Programme and Budget proposals for 1998-99.

90. Mr. Gray said that the Workers would have preferred Scenario I because $2.3 million was a mere trifle compared with the total of the budget and surely would have been found from somewhere during the course of the biennium. However, they recognized that this would have been difficult for Government members to accept and in a spirit of compromise they expressed support for Scenario III, further reductions "across-the-board".

91. Mr. Marshall said that the Employers also would have accepted Scenario I but realized that it was unlikely to receive unanimous support from the Government members. They would prefer a budget to be based on priority actions towards established objectives and hoped that the agreement on the IMEC proposals would make this possible in future. In the meantime they were prepared to support Scenario III.

92. The representative of the Government of France commended the Office for presenting this document so promptly and expressed support for Scenario III.

93. The representative of the Government of Japan agreed with the previous speaker and also expressed support for Scenario III.

94. The representative of the Government of Italy agreed with the statement of the representative of the Government of France.

95. The representative of the Government of Canada also expressed agreement with the statement by the representative of the Government of France.

96. The representative of the Government of Panama also wished to express support for Scenario III.

97. The representative of the Government of the United States expressed appreciation for the Office's prompt response to the Committee's discussion the previous week. She supported Scenario III but would reserve the United States position on the final level of the budget until the Conference in June.

98. The representative of the Government of Nigeria also expressed support for Scenario III but asked the Office to give the fullest possible consideration to disadvantaged member States when further budget reductions were sought.

99. In the light of the views expressed by all members of the Committee, and subject to the reservations expressed, the Chairman took it that the draft programme and budget could now be recommended by the Committee to the Governing Body.

100.Subject to the positions taken, and to the reservations expressed during the discussion, the Committee recommends:

(a) that the Governing Body propose to the International Labour Conference at its 85th Session (June 1997) a provisional programme level of $557,795,050 estimated at the 1996-97 budget exchange rate of 1.16 Swiss francs to the US dollar, the final exchange rate and the corresponding US dollar level of the budget and Swiss franc assessment to be determined by the Conference;

(b) that the Governing Body propose to the Conference at the same session a resolution for the adoption of the programme and budget for the 66th financial period (1998-99) and for the allocation of expenses among member States in that period in the following terms:

The General Conference of the International Labour Organization, in virtue of the Financial Regulations, adopts for the 66th financial period, ending 31 December 1999, the budget of expenditure for the International Labour Organization amounting to $......... and the budget of income amounting to $........., which, at the budget rate of exchange of .... Swiss francs to the US dollar, amounts to ............. Swiss francs.

Bearing in mind --

that, in adopting the budgets of income and expenditure for the 65th financial period, the General Conference requested the Director-General to present proposals to the Programme, Financial and Administrative Committee for adjustments to the budget of expenditure;

that the Governing Body, at its 264th (November 1995) Session, accordingly agreed to make downward adjustments amounting to $21,704,950;

that, in consequence, if the budget of income is fully received, it is expected that there will be a budgetary surplus for the 65th financial period arising from the downward adjustments and amounting to $21,704,950, which, at the budget rate of exchange for that financial period, would amount to 25,177,742 Swiss francs;

the General Conference resolves --

that, in derogation from article 18 of the Financial Regulations, the said expected budgetary surplus of 25,177,742 Swiss francs shall be treated as budgetary income for 1998;

that, in derogation from article 10.1 of the Financial Regulations, the remainder of the budget of income, denominated in Swiss francs, shall be financed from contributions from member States amounting to ........... Swiss francs in 1998 and ........... Swiss francs in 1999, allocated among member States in accordance with the scale of contributions recommended by the Finance Committee of Government Representatives for those years; and

that, should the said budgetary surplus be less than 25,177,742 Swiss francs, arrears of contributions received shall be used to finance the income budget for the 66th financial period, subject however to the resolution adopted by the General Conference at its 82nd Session (June 1995) concerning the utilization of arrears of contributions to cover budgetary deficits.

Statement by the IMEC group

101. The representative of the Government of Canada, on behalf of the IMEC group, recalled that one of the proposals included in the original adjustments by the Director-General concerned the reorganization of senior management in the ILO. The IMEC group believed that a review of the senior management structure should be carried out, but broadened to take account of the need for regional and political balance and to look at ways of streamlining the full corporate management structure, not necessarily just at DDG and ADG level. They proposed that the Director-General undertake such a review, which would obviously take considerable time, and perhaps make a preliminary report to the Governing Body in March 1998. This would include more definition of the functions and responsibilities of senior management, how these could be streamlined, what other economies might be found and also a timetable for action.

102. In reply to the representative of the Government of Canada, the Director-General observed that the IMEC group comprised a number of countries with permanent seats on the Governing Body. Along with the Employers and Workers, this group has the longest institutional memory.

103. He reminded the permanent members of the IMEC group that he had already undertaken an exercise of this nature after the 1995 Session of the Conference when he had been asked to find $40 million in savings.

104. In September 1995 he had somewhat rashly submitted proposals to a Governing Body working party which sought not only to make economies but also to reorganize the Office around three poles. He remembered very well the Governing Body's reaction in November 1995 when it considered the reorganization that was proposed and the economies to be made.

105. The Director-General assured the representative of the Government of Canada that he was only too willing to do whatever the Governing Body asked of him. But he thought it would be wise in this case for the Governing Body or a Governing Body delegation to tell him exactly what was wanted so that he could act accordingly. He had no desire to embark on another such reform without first taking the necessary precautions.

Appendix III: Director-General's reply to the discussion in the Programme, Financial and Administrative Committee of the Programme and Budget proposals for 1998-99.

Appendix IV: The Director-General's proposals for adjustments to the Programme and Budget proposals for 1998-99.

Appendix V: Resolution for submission to the International Labour Conference as presented by the Government of the United Kingdom.

Appendix VI: Proposal by the IMEC Governments.

Appendix VII: The Director-General's proposals for further adjustments to the Programme and Budget proposals for 1998-99.

Appendix VIII: Proposal by the IMEC Governments.

Appendix IX: Provisional programme level resulting from the adjustments proposed by the Director-General.

Appendix X: Proposed expenditure budget for 1998-99 by major programme.

1. GB.268/PFA/6/3.

2. Appendices IX and X are available separately. When this document is reproduced in final form as the third report of the Programme, Financial and Administrative Committee all appendices will be attached thereto.

Updated by VC. Approved by NdW. Last update: 26 January 2000.

For further information, please contact the Official Relations Branch at Tel: +41.22.799.7732, Fax: +41.22.799.8944 or by e-mail: RELOFF@ilo.org